Tariff Man Set The Stage, Then The Machines Took Over

I opined after Monday's "relief rally" that the move had been a bit underwhelming and that uncertainty appeared to have crept back into the market. By Tuesday morning, traders began to realize that Trump may have over-tweeted the trade "deal" and the uncertainty creep was starting to look like a brisk walk. And by the time the lunch bell rang Tuesday, that brisk walk had morphed into an all-out sprint.

The question of the day is, why did stocks suddenly tank? The fear of the Fed overshooting had been put on the back burner. Trump appeared to be on the brink of a trade deal, which, as the bulls argued, should assuage the fear of a prolonged trade war wrecking the global economy. All of the above was supposed to result in less chance of the final big, bad fear becoming a reality - the fear that synchronized global growth would morph into a global recession. As such, stocks were "supposed" to rise. Especially given the tendency for stocks to move from the lower left to the upper right of the charts at this time of year.

But a not-so-funny thing happened on the way to the Santa Claus rally. It appears that Santa's sleigh crashed on takeoff as the Dow tanked and finished with loss of 800 points.

I proceeded to spend most of Tuesday afternoon answering questions from my advisor clients and "esplainin" what the heck was going on. I was asked about the inversion of the yield curve, the status of the trade deal, the move in the bond market, the state of Brexit, Italian bonds, Deutsche Bank, bank stocks, the consumer and retail, risk parity's role in the move, and of course, the 200-day moving averages. So many worries, so little time!

My explanation went something like this. "Tariff Man" set the stage. A new worry took hold. The technicals broke big. And the machines took it from there.

Look, Up In The Sky, It's... "Tariff Man"

On the trade "deal" (a term that is being used more loosely with each passing day) front, recall that Trump's decision to appoint noted China trade hawk Robert Lighthizer to lead the negotiations with China raised some eyebrows. The thinking was that Lighthizer wasn't the guy to get a deal done in the next 90 days. Cue the concern.

Then on Tuesday morning, we got the "Tariff Man" tweet. In his usual blunt fashion, the President said, "I want this deal to happen, and it probably will. But if not remember... I am Tariff Man."

Trump tweeted on, "When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN."

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Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any ...

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